Coal news and updates

U.K. coal-fed power stations will gain an extra year of profitability after the government froze a carbon dioxide emissions tax designed to help fight global warming, according to Bloomberg New Energy Finance.

 

Chancellor George Osborne kept the U.K.’s carbon price support stable until 2020 in his March 19 budget, making it cheaper for utilities to burn coal instead of gas until 2018, New Energy Finance said in a report published today. Power generated from U.K. coal stations will drop to 16 percent of output in 2018 from 39 percent in 2014, the report showed.

 

The price support is an additional fee introduced in 2013 to raise the cost of carbon from U.K. power generators above the price of European Union emissions allowances, which fell to a record low last year. Making emissions more expensive was intended to encourage utilities to switch to burning natural gas or generating power from renewable sources.

 

“The U.K. is not abandoning its carbon price floor policy,” Jonas Rooze, the lead European power analyst at New Energy Finance in London, said. “The cap will stop the all-in U.K. carbon price from exceeding the price floor trajectory by as much as it otherwise would.”

 

The U.K. chancellor capped the carbon price support at 18 pounds ($30) a ton from 2016 for the rest of the decade as part of an effort to reduce pressure on consumer energy bills. The support level is set to rise on April 1 to 9.55 pounds from 4.94 pounds currently, and almost double to 18 pounds in 2015.

 

Coal Profit

 

Coal generators are currently more profitable than gas plants with or without the freeze, according to New Energy Finance. That advantage will probably limit the impact of the March 19 announcement on emissions from coal-fed plants.

 

Profits from burning coal at U.K. power stations next winter advanced 0.4 percent today to 19.45 pounds a megawatt-hour, according to data compiled by Bloomberg. The so-called clean dark spread calculates forward power, fuel and emissions prices to show the profitability at generating plants.

 

The cap on carbon costs will reduce U.K. electricity prices by about 3 pounds a megawatt-hour in 2016 and as much as 5 pounds a megawatt-hour in 2017, according to the report. Power could drop by as much as 7 pounds a megawatt-hour in 2018, according to the report.

 

EU carbon allowances for December declined 1.8 percent to 6.14 euros a ton at 12:54 p.m. on London’s ICE Futures Europe exchange. The cost of the permits, the best performers of 80 commodities tracked by Bloomberg, may double by 2015, according to a forecast by ABN Amro Group NV.

 

To contact the reporters on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net; Rachel Morison in London at rmorison@bloomberg.net

 

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Andrew Reierson, Claudia Carpenter

 

 

Source: http://www.bloomberg.com/